It is interesting to observe that these same municipalities seeking to offload public hospitals are also saddled with exhorbitant pension and benefit obligations for their unionized employees. I would advise all needy patients, next time they need health care, to call their local SEIU or AFL/CIO office, and ask why pubic employees' benefits are more of a priority than hospitals that provide access to health care for the neediest of our society.

11:01 am August 30, 2010

county commis wrote :

“Do you agree that the era of public hospitals is coming to a close?”
Under the new health care law everyone (or nearly everyone) is supposed to be insured. So doesn’t that mean we won’t have any more indigent patient therefore there won’t be any need for public hospitals to exist?

11:20 am August 30, 2010

AlxHamiltn wrote :

As stand-alone institutions, not-for-profit and public hospitals will soon be things of the past.

12:05 pm August 30, 2010

Mark Montgomery wrote :

Katherine, I have been enjoying your blog and sharing with my network-- good work.

From the perspective of a management consultant and now founder of a semantic healthcare platform, in combination with extensive dealings with public and private hospitals over the years-- family as patients and donors....

I do believe that public hospitals are not positioned well to survive, but for a variety of reasons not obvious to many. In many cases the problem isn't scale, or type of entity, but rather structure and management of the entity. For example one non-profit hospital I am familiar with is the largest in a metro region that depends upon enormous ongoing gifting as well as public subsidies. Both the gifting and public subsidies were not sustainable, and were only achieved due to bubble caused capital gains in gifting, and real estate bubble taxation in local government.

Now, the part that really irritated me with this institution and management is that we were very much aware in our circle of friends that individuals were reaping enormous personal gain from the lack of structure and fiscal discipline. For example one of many surgeons we knew affiliated with the hospital was earning well into the 7 figures, but the hospital was increasingly reliant on gifts from people, some of whom at the retail level were below the poverty level, as were many of the tax payers in the same region.

That's one problem that I've also seen in government management, universities, and frankly across our society (including formal audits earlier in my career that showed clear trends of abuse).

Another problem is of course the macro issues in healthcare that from an organizational management perspective, and sustainable economics; is on a suicidal trajectory. I studied the reform legislation in some length as I had to structure our platform accordingly to some degree. From strictly an economic perspective, the legislation failed systemically to deal with costs, so by the law of physics the process is far from over. The strong point is a combination of increased regulation for standards, although it leaves an enormous amount of power with HHS Sec., combined with financial incentives to do what they would have done anyway if their markets were functioning properly.

I learned the hard way in formal audits of many different types of organizations that the common view of entities is simply wrong-- from a functional perspective, it matters not what type of entity it is, but rather the people, structure, environment, and culture of the organization. I saw many each of terribly managed organizations--to include fraud and abuse, in all types of entities. Similarly I have seen exceptionally managed organizations in all entity classes as well.

Bottom line in the macro picture is that greed, fraud, and waste has become entrenched across too much of the healthcare ecosystem. Many salaries are simply not close to sustainable as the rest of our economy simply can no longer support it. Disruptive efficiencies must be introduced that decrease costs dramatically while simultaneously improving care. In order to achieve this essential mission patient's must be not only far more empowered from a market perspective, but also with transparent information.

Anyone who has reviewed billing in multiple healthcare organizations as I have should easily be able to recognize dysfunction. "If something cannot go on forever, it will stop," -- Stein's law (Herbert)

2:06 pm August 30, 2010

it depends wrote :

I think it all depends on how much Medicare and other insurance programs are going to pay the hospitals for services. On the other hand under the new law essentially all patients will be insured, so hospitals no longer have to eat the cost. And don’t forget 17% of GDP goes to health care industry--- that‘s a lot of money. We should not be surprised if some of the not-for-profit hospitals making tons of money in the future. And we should not count public hospitals out either.

2:13 pm August 30, 2010

Ayurved Doctor wrote :

This is true that public hospitals are poorly managed. If you will see a hospital in a developing country you will find how true is this.

Public hospitals are positioned to lose in a down economy on a number of fronts:
1. Decreasing availability of philanthropic gifts which can drive 5-20% of total revenue.
2. Decreasing compensation for caring for the Medicaid population as state revenues dry up.
3. Simultaneously, a down economy drives more people away from better-paying private insurance into Medicaid.
4. The PPACA for example achieves almost all of it's coverage expansion through Medicaid, not private coverage.
5. Decreasing tax revenues in the parent entities (typically County Government) decrease their ability subsidize the facility.
6. Association with local government leads to corruption and decision making that is not business-smart but tends to be more political-smart which is almost always leads to short-term solutions and long term problems.

I could go on, but agree that the County Hospital is very poorly positioned to compete normally, but especially in a down economy.

WR29

3:23 pm August 30, 2010

war horse wrote :

The Thomson Reuters analysis released in early August shows that investor-owned hospitals were by far the worst in terms of both patient care and cost-efficiency. The best were church-owned hospitals followed by not-for-profits. If public hospitals are "poorly equipped to survive," it's not because they provide poorer care or are less cost-effective. It's because they're being driven under so they can be taken over by hospitals providing poorer quality, more expensive care--paid for by the govt and the insured--that makes a lot of money for somebody else.

3:32 pm August 30, 2010

AlxHamiltn wrote :

Thank you Mark M.

7:31 pm August 30, 2010

Agree with Mark Montgomery wrote :

I suspected all along that the cost of healthcare was so high because of overpaid surgeons. The surgeons whine about low reimbursement but as you have seen first hand these surgeons are making MILLIONS of dollars. How else do they afford their Mercedes? God help me find a surgeon who isn't a crook! Some of those surgeons think that God created gallbladders only to generate revenue.
Thank you for that information. Keep up the good work.

6:55 am August 31, 2010

Michael Leiter wrote :

In addition to the organizational problems of public sector health care well described by Mark M, they suffer from value collisions on the micro level. My surveys of health care professions shows a shocking drop in work engagement for new professionals moving into public sector institutions: In the first six months, their vigor and dedication drop like a stone.

To inspire the best work from their providers, an organization needs leaders at every level with not only the will to live their values through their work, but the managerial, policy, and executive support to achieve that demanding ideal.

Unfortunately, the management of many non-profit hospitals is second-rate. From the CEO on down, these institutions are run by individuals who have little business background or incentive to push their organizations to higher performance. Check the IRS Form 990 that nonprofit hospitals must file and note the outrageously high salaries, often over $1 M per year, these mediocre executives enjoy. Consider these salaries during your next visit to your local hospital when you observe lackluster staff performance, poor patient care and arrogance and disregard fior their "customers". These institutions belong in the hands of professional managers who are motivated by the need to perform - this transition cannot happen fast enough.

8:24 am August 31, 2010

Anonymous wrote :

I have not seen a lot of Doctors make unsustainable salaries "into the 7 figures". However I have seen a lot of CEOs of non-profits and a lot of the "management consultant" friends do that.
Hospital costs in and of itself are the issue. The same test in the hospital costs sometimes 10 times what it does in a doctors office. Either the Doc's offices is paid too little for that service or the Hospital too much. HOwever when we pertetuate that sort of intransparency, we get what we deserve.

8:44 am August 31, 2010

Mark Herbert wrote :

Several of these comments represent the usual blame game.What about addressing the 60% of health care issues that are directly related to individual lifestyle issues or the generations of corporate codependency created by organizations creating an entiitlement mentality to high quality health health care with little of no personal responsibility for the costs or education about the causality?
I am not sure the "private sector" should pound its chest about the efficient and high quality delivery of health care outcomes, the numbers don't prove it out.
There isn't room for mediocre performance coupled with high executive compensation in any industry, but I would look at the relationship between CEO compensation and organizational performance across the board before I started throwing rocks.
A look at the performance of "professional managers" in financial services and their results versus pay tells a interesting story- and by the way I am from the private sector. A look at financial services, the automotive industry and a couple of others shows a pretty clear picture we don't have the market conered on customer centricity of competence...

9:12 am August 31, 2010

Doctor Zhivago wrote :

All hospitals that are not part of a monopoly or oligopoly will have trouble surviving because of vast expenses of HIT and its maintenance and failure to improve outcomes or reduce costs; and the destructive competitive advantage of the monopolies (where, incidentally, the care may be the worst). Boards and the CEOs enjoy feeding at the troughs, but when the going gets tough, the golden parachutes serve as the shoots to nirvana.

11:02 am August 31, 2010

md2 wrote :

The title of the article says it all. And governance is at issue. At different levels.
Why are there laws limiting the building and/or expansion of physician owned hospitals? Because they do it better and at lower cost?
Why did CMS reduce payments for outpatient endoscopic facilities? To drive patients back into the more expensive hospital based programs.
Government subsidies preclude a drive to the most efficient and cost effective organizations.
Again, when has a public organization done something more efficiently than a private one?

Add a Comment

Error message

Name

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.